ESTIMATION, ANALYSIS AND PROJECTION OF INDIA'S GDP: A TIME SERIES MODEL

Abstract

Gross domestic product or GDP, tells us the country's current aggregate production of goods and services. It is often considered the best measure of how well the economy is performing. GDP summarizes the aggregate of all economic activities in a given period of time. In any economy, however, goods and services produced are not homogenous. It is not possible to add, for example, 10 barrels of petroleum with 10 million matric tons of wheat. So, as a trick, quantities and volumes of all respective goods and services are multiplied by their prices and then summed up. This gives the money value of GDP. Prices however include indirect business taxes (IBT) i.e. sales taxes and excise duties. So this GDP is not a true measure of the productive activities in the economy. In order to get a true measure of GDP we deduct IBT from GDP. This is called GDP at factor cost. For all practical purposes the government uses data on GDP at factor cost. The government of India has started Economic Reform program following the guidelines of IMF and World Bank with a number of ends keeping in view, one of which is that this program would boost up the annual growth of GDP through liberalizing trade. The philosophy of comparative advantage tells that free trade can increase the GDP of the trading countries.